INTERNAL AUDIT FUNCTION AND ITS CHALLENGE IN ETHIOPIAN PUBLIC ENTERPRISES: THE CASE OF SNNP REGIONAL STATE.

Abstract

The study has been conducted with the aim of investigating the role of internal audit function in risk management, control and governance and challenges that have an effect on this function in Ethiopian Public Enterprises, the case of SNNP Regional State. The study adopts a descriptive and explanatory method as the research methodology and used purposive sampling technique. Accordingly, a questionnaire was distributed to 72 internal auditors, managers, operational managers and supervisors of all eleven enterprises, of which 68 were collected with a response rate of 94.4%. To examine the role of internal audit function and its challenges, ordinary least square multiple regression were employed. The multiple linear regression results show that risk management role of internal audit function is positively and significantly determined by organizational independence, management support, formal mandate, sufficient funding, competent staff and compliance with professional audit standards.. The finding also shows that internal audit function for control is positively and significantly determined by organizational independence, unrestricted access, ethical standards, sufficient funding, competent staff, existence of audit charter, and compliance with professional audit standards. From the total of eight independent variables, six independent variables namely, unrestricted access, ethical standard, formal mandate/existence of audit charter, management support, competent staff and compliance with professional audit standards were also identified as a significant factor for the success of governance processes in the enterprises. Thus, for the success and improvement of risk management, financial control and governance of internal audit function processes in the public Enterprises, the policy makers should value the contribution of these variables.